Cost of living plans 'skew support' to richest households

Liz Truss pledged during her first Prime Minister’s Questions to reverse 1.25 per cent increases made to national insurance brought in by the previous chancellor Rishi Sunak.

It is understood an announcement could be made on the issue on either Thursday, September 22, or Friday, September 23.

But the Resolution Foundation has said this, combined with the energy price guarantee (EPG) announced last week, could mean the 10 per cent of households with the highest income could benefit by an average of £4,700, while the poorest tenth receive £2,200, in 2023/24.

In April, the previous Government brought in a 1.25 per cent increase to national insurance, with proceeds earmarked for the NHS and social care.

Scrapping the rise will give workers back some of their pay packet above the national insurance threshold of £12,570 – saving £155 a year for someone paid £25,000, £343 for a worker on £40,000, and £1,093 for anyone with a salary of £100,000.

Proportionally, this means those higher paid will benefit significantly more than those on lower salaries.

In addition, the Resolution Foundation found higher-income households typically use more energy, so would benefit more from the ERG.

The report said Ms Truss’ plans “will skew support towards the very highest-income households”.

The cost of the EPG, which will be funded by borrowing, “could eclipse the £137 billion worth of bailouts for banks during the financial crisis”, it found.

In addition, the £36 billion the Government estimated would be raised by the national insurance changes, £5.3 billion of which was due to go to social care, will have to be funded from elsewhere.

Health Secretary Thérèse Coffey confirmed this, saying “Instead of having, in effect, a ring-fenced levy, we will be funding [health and social care changes] out of general taxation”.

The think tank said there is a “strong case” for extending windfall taxes on oil and gas producers but also an argument for implementing a “solidarity tax” of some form on the rich to help cover the cost.